If you are new to investing, then jumping into the stock market can understandably feel intimidating. This is especially true if you don't have a lot of money to invest with and aren't working with an investment group. At the same time, it can also be frustrating to sit on the sidelines and watch others make money from their investments. So what if you could have the best of both worlds? Invest but do so with minimal risk and funds? Such is a possibility with fractional share investing.

The Basics of Fractional Share Investing

As the name suggests, fractional shares are fractions of an entire share of stock, rather they are a partial share of a full equity share. With fractional shares, you can begin trading with less than $5 a trade. Fractional share investing is frequently a result of stock splits, dividend reinvestment plans, and similar corporate actions. Brokerage firms will often purchase whole shares of stocks and then split them in order to sell them off to an array of investors. Thanks to new apps, anyone can get started with fractional share investing and can do so with any budget.

The Big Advantages of Fractional Share Investing

• Low investments. We can't stress this big advantage enough. Fractional share investing is a fantastic way for newcomers to get involved in the market and test the waters without having to invest too much of their hard-earned cash. With less than $5 a trade, you can become an aspiring investor and watch your money grow. You can take risks and try trades you might otherwise have avoided. This lower entry point helps give new investors confidence with fractional shares before moving on to full shares -- if so desired.
• Great diversification possibilities. Lower cost investments make it easy both for investors to take a first step into stock investment and it makes it possible to more easily diversify one's investments. Diversification is about trying different shares and strategies so that you can have a larger chance of success with share investments. But with traditional share investing, because you are purchasing full shares, it can be hard to complete more than one trade at a time. Not so with fractional share investing! With fractional share investing, you can start making your first, second, and even tenth trade with a new company, as the name suggestions, fractions of a dollar. Diversifying your investments like this is always a good idea and a time-tested smart investment technique as the more stocks you try, the greater your chance at profits in the long-term.
• Compound interest with varying payouts. This is perhaps one of the most exciting advantages of fractional share investing! When investing in this manner, it's often a good idea to get paid dividends and then invest further. Every company you invest in with fractional share investing will pay out dividends and they will do so at varying dates and frequency. Even small amounts such as that made with fractional investing will earn dividends and that interest compounds over time. 

Two Great Fractional Share Investing Brokerages to Get Started With

Not sure how to get started with fractional share investing? The following is a look at some of the best investment brokerages open to everyone and open today for your first fractional share trade:

• Stockpile. Stockpile is a relatively new brokerage but if you are new to investing, they offer a great platform to test on. This brokerage offers fractional shares of more than 1,000 stocks and EFTs and each trade done costs only 99 cents. In fact, this trade price is the only price you'll pay through Stockpile as the brokerage has no account minimums, no monthly fees, and no hidden charges. This transparency makes it a great choice for both newcomers to the market and those stock buyers who want to diversify and try something new. 
• MI Finance. Investors who regularly purchase shares of the same investments do what is called 'dollar cost averaging' in which they slowly build up a portfolio that enables them to ride out any potentially volatile times -- times in which stock prices rise and fall sporadically.  When you go it alone, building up a portfolio can take a lot of time and effort, especially when you're doing fractional sharing with many different companies, but when you do it with MI Finance, you enjoy use of their unique tool called "The Pie" which easily breaks down your investment into an outstanding visual format. You can also set the system to automatically invest in new shares, of a group you have specified, for better long-term focus. 

Questions? Contact Us at Financial Health Guru

Note that while we can offer suggestions on fractional share investing, it's up to you to make the big first move. If you have questions on fractional share investing or other types of investing, leave us a comment or contact our team via email today.